Is FICO Stock A Buy or Sell?

The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31st. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Fair Isaac Corporation (NYSE:FICO).

Is FICO stock a buy or sell? Investors who are in the know were turning less bullish. The number of bullish hedge fund positions shrunk by 5 in recent months. Fair Isaac Corporation (NYSE:FICO) was in 38 hedge funds’ portfolios at the end of December. The all time high for this statistic is 45. Our calculations also showed that FICO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 43 hedge funds in our database with FICO positions at the end of the third quarter.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Fred DiSanto of Ancora Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s take a glance at the latest hedge fund action encompassing Fair Isaac Corporation (NYSE:FICO).

Do Hedge Funds Think FICO Is A Good Stock To Buy Now?

At fourth quarter’s end, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from one quarter earlier. By comparison, 45 hedge funds held shares or bullish call options in FICO a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Fair Isaac Corporation (NYSE:FICO) was held by Melvin Capital Management, which reported holding $498.3 million worth of stock at the end of December. It was followed by Ako Capital with a $189.7 million position. Other investors bullish on the company included Valley Forge Capital, Broad Bay Capital, and Fisher Asset Management. In terms of the portfolio weights assigned to each position Valley Forge Capital allocated the biggest weight to Fair Isaac Corporation (NYSE:FICO), around 16.44% of its 13F portfolio. Broad Bay Capital is also relatively very bullish on the stock, dishing out 9.53 percent of its 13F equity portfolio to FICO.

Seeing as Fair Isaac Corporation (NYSE:FICO) has experienced a decline in interest from hedge fund managers, it’s safe to say that there were a few funds that elected to cut their full holdings heading into Q1. At the top of the heap, Qing Li’s Sciencast Management said goodbye to the largest stake of all the hedgies monitored by Insider Monkey, totaling close to $1.1 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund sold off about $1.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 5 funds heading into Q1.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Fair Isaac Corporation (NYSE:FICO) but similarly valued. We will take a look at Duke Realty Corporation (NYSE:DRE), NetApp Inc. (NASDAQ:NTAP), Masimo Corporation (NASDAQ:MASI), Oak Street Health, Inc. (NYSE:OSH), Boston Properties, Inc. (NYSE:BXP), ABIOMED, Inc. (NASDAQ:ABMD), and Campbell Soup Company (NYSE:CPB). This group of stocks’ market valuations are closest to FICO’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $471 million. That figure was $1405 million in FICO’s case. NetApp Inc. (NASDAQ:NTAP) is the most popular stock in this table. On the other hand Duke Realty Corporation (NYSE:DRE) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Fair Isaac Corporation (NYSE:FICO) is more popular among hedge funds. Our overall hedge fund sentiment score for FICO is 75.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Unfortunately FICO wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on FICO were disappointed as the stock returned -10.2% since the end of the fourth quarter (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

Disclosure: None. This article was originally published at Insider Monkey.